TREASURY SHOWN IN A NEW LIGHT PWC GLOBAL TREASURY SURVEY 2014 - WWW.PWC.COM/CORPORATETREASURY
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www.pwc.com/corporatetreasury
Treasury shown in a new light
PwC Global Treasury Survey 2014
October 2014
Contents
Introduction 2
Executive summary 3
How treasury is evolving 5
Treasury extends its role 5
Are budgets keeping up? 6
What are treasurers thinking about? 8
Cash remains king 9
Funding: Beyond banks 11
Focus on reporting 13
KPIs: Bridging the gap between measuring and benchmarking 14
Monitoring banks 14
Counterparty risk management 14
Treasury automation becomes the norm 16
Future regulation: The wild card 17
Control your destiny 18
About PwC’s Treasury Benchmarking Tool 19
Methodology 20
More information 21
Treasury shown in a new light – PwC Global Treasury Survey 2014 t 1uIntroduction
This edition of our latest Global Treasury Survey is special as, for At the same time treasurers are taking on more responsibility
the first time, it’s based on information collected from our new through effective business partnering outside their department,
Global Benchmarking Tool, which allows companies to compare and many now have a role in working capital management,
their treasury strategy and operations anonymously with those operational payment processing and commodity risk management.
of similar organisations around the world. This survey gives a We see treasurers exploring their expanding role in core business,
taste of the value that our benchmarking tool can bring, and both centrally and regionally, and thinking about its implications.
we’d like to thank all of the companies and treasury professionals
One notable challenge comes with the availability of and access to
that provided input for their time and willingness to share even
(qualified) treasury staff, in a world of increased responsibilities
sensitive information with us.
and with often constrained budgets. What could the consequences
The role and responsibilities of treasury beyond the departmental be for control and the overall effectiveness of treasury?
wall has transformed since the financial crisis of 2008. The crisis
Another overarching theme emerging from our survey and our
put liquidity and risk – and therefore the critical role of treasury
work with corporate treasuries is that CFOs and other senior
– into the spotlight and treasurers were seen in a new light by the
executives have raised their expectations of treasury; time and
board and others throughout the organisation. The direct crisis
thought needs to be dedicated to providing clarity about roles,
management actions that treasurers took in the months after the
responsibilities, priorities and how treasury interacts with the
crisis have now been replaced with a focus on long-term solutions,
business in today’s more demanding environment. Equally,
transforming treasurers’ role still further.
treasurers need the support of an adequate budget and need to
Today, we see a corporate treasury profession that’s maturing integrate their own operating model with that of the wider finance
and consolidating its role as the custodian of financial and function, and ultimately with the business.
liquidity risk management. Best practice has found its way into
I hope that this report is helpful not only in highlighting current
Sebastian di Paola the policies, procedures and systems of most corporate treasury
trends within corporate treasury but also by providing some
Global Corporate Treasury Leader, PwC departments, and there’s a strong consensus around strategy,
insights into how to address them. Please do not hesitate to
execution and reporting.
connect with your regular PwC contact on any of the issues
addressed in this document.
t 2u Treasury shown in a new light – PwC Global Treasury Survey 2014Executive summary
The financial crisis brought treasury – through the need to Treasurers under pressure. Today’s treasurer has to be an all-
manage cash, liquidity and risk – firmly into the spotlight. In round professional; not only someone with a full understanding
the years following the crisis, treasury teams expanded their of liquidity and exposure management but a business consultant,
influence more widely across the organisation, getting closer to process manager and IT-project owner as well. Given the
the business operations and allowing them to move on from the increased demands from a range of stakeholders, it’s debatable
historical transactional focus on producing data, to bring more whether today’s treasurers have the resources they need to
value-added insight into the risks facing the business. meet requirements and stay in control. It’s also a concern that
treasurers may not have the appropriate budgets to meet these
This year’s survey highlights how the treasury function is
requirements.
changing, and the pressing questions that this raises for
organisational structure, treasury reporting and systems, Where will funding come from? Funding is a top priority for
oversight and control: treasurers, particularly those in organisations with a low credit
standing. Treasurers are now exploring and implementing
Redefining treasury. The involvement of treasury in
alternative sources of funding, most notable in the area of supply
financial processes which normally sit outside its department,
chain finance. This development demands further integration of
such as working capital management, commodity management
treasury operations into the organisation’s finance operations;
and operational payment processing, raises critical issues
treasurers must step forward and define the best way to
around roles, responsibilities, governance and reporting.
collaborate in order to optimise the funding strategy.
Treasury is becoming a collaborative, enterprise-wide process;
it’s time to re-assess what we mean by ‘treasury activities’ Meeting reporting demands without compromising on quality.
within organisations. Senior executives are asking for more detailed treasury reporting,
putting pressure on staff and systems to meet data collection,
Who’s in charge? The proportion of full-time treasury employees
processing and mining needs. Treasurers are being pushed to
working outside of central treasury has increased over the
implement new and more integrated solutions in order to create
past four years; they are now dispersed beyond the treasury
flexible reporting in (near) real time, which can change the
department and more treasury activities are outsourced, often
nature of treasury management system (TMS) implementation
through shared service centres. CFOs must decide who ‘owns’
and create even more pressure on budgets and staffing levels.
these organisation-wide treasury activities. If it’s not treasury,
then what is treasury’s role in maximising the value for the Align measurement to treasury objectives and policy. While
organisation? This is treasury’s opportunity to work with its mature treasury functions are well reported, there’s a gap
business partners to build an efficient structure for treasury between reporting and effective measurement that has to be
processes, one that drives value within the business. addressed. Too often, treasury activities are reported without
explicit reference to agreed strategy and pre-defined KPIs to
closely monitor performance.
Treasury shown in a new light – PwC Global Treasury Survey 2014 t 3uExecutive summary (continued)
Technology partnerships. Technology has become the backbone integration with the wider finance function. CFOs and treasurers
of effective treasury management but the dependency on need to evaluate the current operating model for treasury, assess
systems is a double edged sword: while most treasurers will the business case for transformation and review their IT options
admit that technology enables them to operate effective and – both in terms of systems integration and in finding ways to
scalable processes with limited staffing, at the same time 70% of benefit from the investments already made in the wider business.
respondents believe that new and changing external regulations
CFO’s and treasurers would need:
pose the biggest challenges to their systems and processes. The
key to addressing the challenge will lie in partnerships with the • To evaluate the current operating model for treasury;
IT function, treasury vendors and agile reporting solutions. • Assess the business case for transformation; and
The topics and challenges raised by this survey require CFOs • Review options for systems integration and leverage the
and treasurers to take a fresh, strategic look at treasury and its investments already made in the destination architecture.
t 4u Treasury shown in a new light – PwC Global Treasury Survey 2014How treasury is evolving
In the years following the financial crisis, treasury has responsibility. The question is whether treasury staffing levels
successfully made the case for the need to develop its people, and budgets are enough to keep up with the demand.
processes and systems. Treasurers have expanded their influence
more widely across the organisation, getting closer to the Treasury extends its role
business operations and allowing many of them to move on from
the historical transactional focus on producing data, to bring Treasurers have seen their role widen outside their department
more insight into the risks facing the business. and responsibilities expand steadily in the years after the
The need for companies to manage cash and risks effectively in financial crisis and now are increasingly involved in operational
new markets, along with the spread of treasury best practices, payment processing, working capital management, trade
has raised the profile of treasury. What’s less clear is whether the finance and commodity risk management (Figure 1). 79% now
treasury function itself continues to ‘own’ its ground. Treasurers characterise their treasury as a ‘value-adding centre’, supporting
have increasingly become involved in financial processes that the fact that treasurers are now working closer than ever with
have traditionally sat outside the treasury department and more other important organisational departments.
organisations are clustering transactional processes in shared It’s also clear that overall staffing levels in treasury have
services; the walls between the treasury department and business increased, especially in areas outside central treasury. This is a
units are disappearing. strong indication that treasury is becoming a process, rather
Senior executives are demanding more and more of treasurers than a department.
– more information, highly scalable processing, more
Total % of available
resources
In business
Regional
Central
0% 20% 40% 60% 80% 100%
Cash management Financial risk analysis
Back office activities Maintenance of treasury systems
Foreign exchange management Investment and counterparty risk management
Financing and bank relationships Interest rate risk management
Other treasury activities including business support Commodity risk management
Figure 1: Who’s doing what in the treasury process
Treasury shown in a new light – PwC Global Treasury Survey 2014 t 5uCentral
0%
20% 40%
Cash management Fina
Figure 1: Who’s doing what in treasury processes
Commodity risk management Bac
Investment and counterparty risk management Fore
Intterest rate risk mangement
How treasury is evolving (continued) Total % of available
Figure resources
1: Who’s doing what in treasury processes
Figure 2: Full-time treasury employees
Total % In
of business
available
resources
2014
Regional
TreasuryInisbusiness
becoming a collaborative, virtual function that Are budgets keeping up?
reaches across the organisation. The very nature of what we
mean by ‘treasury’ is being redefined – and this means that it’s Greater
2010* and wider responsibility for treasurers and more
Central
Regional
essential that it’s clear who has ultimate responsibility for key demanding reporting requirements should be supported by
treasury processes. 0% investment
0 in people
5 and
10 technology15 – which
20 both
25require30
an
20% 40% 60% 80% 100%
But there areCentral
worrying signs that there’s a lack of consensus on adequate budget.FTE in Central Treasury
Average
Cash management Financing and bank relationships Maintenance
Average of treasury
FTE Outside Treasurysystems
how enterprise-wide Average FTE in Regional Treasury
activities
treasury
Commodityshould be organised. Who has
risk management Back
Theoffice
average treasury budget for staff, Other treasury
systems activities inc. business suppo
and projects
0%
Investment and counterparty risk management Foreign exchange management Financial
overall control of treasury activities that are
20% carried out beyond 40% 60% 80% risk analysis
(figure 3) fell slightly between 2006 and 2010 but has risen in 100%
Interest rate risk mangement
the central department? Without
Cash management a clear structure and firm the pastand
Financing four
bankyears and now stands at
relationships $4m. While the
Maintenance increase
of treasury is
systems
oversight the likelihood of inefficiencies,
Commodity and the more serious
risk management Back office activities
welcome, Other
this is still a small budget for treasurythat’s
a function activities inc. business suppo
having
Investment and counterparty
danger
Figure raised treasury
2: Full-time employees operationalrisk
by poorly-monitored management
risk, increases. Foreign exchange management
an Figure 4: Top
increasingly significant of the
impact
Financial risk analysis
ontreasury agenda
the organisation.
Interest rate risk mangement Figure 3: Annual treasury budget range, 2006 - 20141
This is an issue for CFOs to address– the operating model for
treasury should be looked as part of the operating model of the 100% Refinancing/ensuring availability of LT 4.5m
2014
Average treasury budget in $
% of respondents
funding and credit lines
Figure 2: Full-time
wider finance treasury
function.employees Figure 4: Top of the treasury agenda 4.0m
80% Cash management optimisation 3.5m
3.0m
60% Refinancing/ensuring availability of LT 2.5m
2014 Implementing or improving cashflow
2010* funding and credit lines 2.0m
40%
Working
Cash capital optimisation
management 1.5m
20% 1.0m
0 5 10 15 20 25 30 .5m
New or improved
Implementing ortechnology/systems
improving cashflow
2010* Average FTE in Central Treasury 0% 0
2006*
Managing Treasury 2010
risks in emerging 2014
Average FTE in Regional Treasury Working capital optimisation
USD8.1m to changesAverage treasury budget
Responding
New or improved technology/systems
Average FTE in Central Treasury in regulations
Figure 2: Full-time
Average FTE intreasury
Regionalemployees
Treasury Figure 3: Annual treasury budget range,in2006-2014
Managing Treasury riskschain
Supply emerging
finance 1
markets
and risk management
Average FTE Outside Treasury Respondinggovernance,
Enforcing/Tightening to changes
policies and inprocedures
regulations
Figure 3: Annual treasury budget range, 2006 - 2014 1
Supply chain finance
Managing counterparty risk
and risk management
100% 4,500
4,000 Enforcing/Tightening
Managing pension governance,
related risks
Figure
80% 3: Annual treasury budget range, 2006 - 2014 1
3,500 policies and procedures
Reducing the cost of Treasury
3,000 Managing counterparty risk
60% operations
100% 2,500
4,500
2,000 Understanding and/or managing
40% 4,000 Managing pension related risks
Commodity risks
80% 1,500
3,500
Taking advantage of improved
Reducing the hedge
cost of Treasury
20% 1,000
3,000
60% accounting standards (IFRS 8)
operations
500
2,500
0% ‘PwC Global Treasury Survey 2010: Can the crisis make treasury stronger’
1
and ‘PwC Global Treasury Survey 2006’.
02,000 Understanding and/or managing
Dealing with the Euro Crisis
40% 2006* 2010 2014 Commodity risks
1,500
>USD8.1m USD4.1m-8.1m USD1.6m-4.1m Taking advantage of improved hedge
20% 1,000 Backstandards
up clearing bank
USD800k-1.6m How treasury is evolving (continued)
Today’s treasurer has to be an all-round professional, skilled in
wider business and IT issues. These broader demands require What you need to think about
more resources, and more training, and yet our survey also • CFOs must decide on the treasury structure. Who is in overall
shows that almost half of organisations are providing their control of treasury processes throughout the organisation?
treasury professionals with an average of less than three days How the treasury function should interact with the wider
of training a year. finance function and the business.
Senior executives are asking more and more of their treasurers: • What is the appropriate target operating model for your
treasurers can meet the challenge, but not without the financial treasury and how does it deviate from today’s?
support that gives them the resources they need. Treasurers must • How to manage the treasury transformation:
clearly articulate – and quantify – the business case for change. • Is treasury adequately staffed to meet the growing
responsibility and demand?
• Is the treasury professional’s tool box kept up-to-date?
Do they receive appropriate training?
• Is there central oversight of treasury processes?
• Are processes consistently applied?
• Is treasury reporting consistent across the organisation?
• Is treasury supported by adequate treasury technology?
• Is the treasury budget sufficient?
Treasury shown in a new light – PwC Global Treasury Survey 2014 t 7 u20% 40% 60% 80% 100%
agement Financing and bank relationships Maintenance of treasury systems
y risk management Back office activities Other treasury activities inc. business support
What are treasurers thinking about?
and counterparty risk management
e risk mangement
Foreign exchange management Financial risk analysis
ees Figure 4: Top of the treasury agenda
Refinancing/ensuring availability of LT
As organisations debate about how to best organise their
funding and credit lines treasury operations, treasurers continue to tackle the common
Cash management optimisation concerns that affect functions at every stage of maturity and in
organisations of any size.
Implementing or improving cashflow
Working capital optimisation
At the height of the financial crisis, pressing issues such as
liquidity, funding and counterparty risk were the top three
20 25 30
New or improved technology/systems priorities for treasurers1; the 2014 survey results demonstrate
y
Managing Treasury risks in emerging that treasury priorities have now shifted to more structural
ury markets
topics and put also focus on the processes that feed into the
Responding to changes
in regulations department. For instance, the importance of working capital
Supply chain finance management rose sharply during the financial crisis, with twice
and risk management
as many treasurers ranking it as a high priority than before.
Enforcing/Tightening governance,
policies and procedures Similarly, managing (operational) counterparty risk and supply
ange, 2006 - 2014
1
Managing counterparty risk chain finance were driven up the agenda. Today, these are still
4,500 high priorities, and cashflow forecasting and treasury technology
4,000 Managing pension related risks
3,500
also feature prominently.
Reducing the cost of Treasury
3,000
operations
2,500
2,000 Understanding and/or managing
Commodity risks
1,500
Taking advantage of improved hedge
1,000
accounting standards (IFRS 9)
500
0 Dealing with the Euro Crisis
2014
m USD1.6m-4.1m Back up clearing bank
Average treasury budget
0% 20% 40% 60% 80% 100%
High Medium Low
Figure 4: Top of the treasury agenda
1
‘PwC Global Treasury Survey 2010: Can the crisis make treasury stronger’ and ‘PwC Global Treasury Survey 2006’.
t 8u Treasury shown in a new light – PwC Global Treasury Survey 2014credit ratings
Board/Risk
Committee decisions
Monitor CDS
spread evolution
Monitor equity prices
Monitor bond yields
Cash remains king Not monitored
0% 20% 40% 60% 80% 100%
The 2008 financial crisis focused everyone’s attention on cash. Figure 6: International cash management techniques in use
Six years on and with the immediate crisis behind us, treasurers
still name cash management as a high priority. But the cash Cashflow forecasting
management agenda is no longer driven by liquidity concerns Centralised funding/
alone. Treasurers are now coming to grips with a multi-bank in house bank
reality, and are working on structural and efficient solutions Pooling within country -
aimed at improved cash visibility. zero balancing account
Cross-border pooling -
We’re seeing steady developments in cash management, from zero balancing account
structures such as in-house banks, which are becoming more Pooling within country -
notional pooling
common by the year, to more efficient use of technology to
manage cash. Even so, a significant proportion of respondents are Multicurrency accounts
struggling with real-time access to their cash balances. Figure 6: Location of cash management activities
Figure 5: Top cash management drivers Intercompany netting
Cost SWIFT
In entity/subsidiary
Complexity/Structure Finance company international
treasury centres
Bank facility headroom
Payment factory
Debt servicing In country/local
Cross-currency pooling -
notional pooling
Tax efficiency
Cross-border pooling -
Technology notional pooling
Regional/cluster
Cross-currency pooling -
Regulatory zero balancing account
0
0% 20% 40% 60% 80% 100% None of the above
20 40 60 80 100
Share service centre/
First Driver Second Driver Third Driver 0% 20%outsourced
40% 60% 80% 100%
Figure 5: Top cash management drivers Figure 6: International cash management techniques in use
Centrally/Group
Treasury
0 20 40 60
Bank fee monitoring
Managing intercompany transacctions an
Centralising available liquidity and manag
Obtaining bank balance and transaction i
Cash forecasting
Treasury shown in a new light – PwC Global Treasury Survey 2014 t 9 uCash remains king (continued)
For the moment, though, cash pooling is pivotal to most What you need to think about
companies’ cash management strategy (see figure 5). Pooling is
important in making sure that complementary cash management • Do Treasury and Tax understand and assess the impact
techniques, such as payment factories and in-house banking, are of BEPS on treasury operations, including existing cash
effective but will gain even more importance in the coming years management and funding structures?
as the regulations imposed by the OECD’s Base Erosion and Profit • What’s the true benefit of getting the cashflow forecasting
Shifting1 (BEPS) initiative come into force. right?
• Who owns the cashflow forecasting process?
It’s essential that central treasuries work closely with their • If the answer is treasury, does it have the resources it needs?
colleagues in tax and legal functions to charter the regulatory
• Is the organisation making the best use of technology in
waters, and also consider the impact on optimal treasury centre
cashflow forecasting and cash management?
location.
• Could you benefit from innovations such as in-house banks
Cashflow forecasting remains a priority for treasurers. Given and payment factories?
its importance, this is reassuring; but when you consider that
cashflow forecasting has been consistently a top-three priority for
treasurers over the past decade – alarm bells must ring.
Methods and tools used to collect data and analyse projected
cashflows haven’t evolved significantly. Spreadsheets are still
used by 89% of all survey respondents for both processes. It’s
hardly surprising, then, that treasurers are still not impressed by
the reliability of cashflow forecasting.
This raises the obvious question: Why is so little invested in
something that’s still rated as one of the highest priorities by
treasurers? Is it possible that other priorities are simply seen as
more pressing, or is it perhaps a budget issue? Could it also be
that organisations are using a flawed cost/benefit calculation? Or
could it be that treasury has little or no control over the quality of
input, despite being the main beneficiary?
1
The OECD’s first tranche of recommendations was released to the G20 in September 2014. For more, see http://www.oecd.org/ctp/beps.htm
t 10 u Treasury shown in a new light – PwC Global Treasury Survey 2014Funding: Beyond banks Figure 11: Mechanisms to monitor counterparty credit risk
Limits against published
Figure 7: Sources of funding
Bilateral bank facilities
credit ratings
Board/Risk Syndicated bank
Committee decisions facilities
Monitor CDS Treasurers continue to be preoccupied with securing funding More thanBonds ever before, the cost of funding is negatively
spread evolution
options for their company, but a distinct two-tier market is correlated to the credit standing of the borrower. Given the high
Monitor equity prices developing. Blue chip companies with a strong credit rating Commercial paper
dependency on bank funding, this funding cost gap is likely to be
Monitor bond yields
are having little problem refinancing and many have seen their exacerbated once Basel III is fully operational and the era of low
Leasing
funding costs fall. For less well-rated companies, access to interest rates comes to an end – when, for example, central banks
ounterparty credit risk Not monitored Figure 7:
funding, Sources
not of funding
to mention affordable funding, is certainly an issue. reverse their
Securitised financequantitative easing policies.
0% 20% 40% 60% 80% 100% Funding is still 0%
closely linked
20% to40%
relationship
60% management;
80% 73%
100%
Bilateral bank facilities
of respondents mention this as a key criterion. It’s no surprise,
Syndicated bank though, that pricing and funding cost are the top priorities when
facilities
Figure 6: International cash management techniques in use Figure 8: Criteria
treasurers for selecting
are evaluating funding
funding sources
alternatives.
Bonds
Cashflow forecasting Pricing
Commercial paper
Centralised funding/ Funding cost
in house bank Leasing
Pooling within country - Relationship with
zero balancing account Securitised finance credit provider
Terms compared to
0% 60% 80% 100% Cross-border pooling - 0% 20% 40% 60% 80% 100% requirements
zero balancing account
Pooling within country Figure
- 7: Sources of funding Refinancing risk
notional pooling
Matching business
ment techniques in use Figure the
Despite 8: Criteria for selecting
regulations funding on
and restrictions sources
the financial industry, plan cashflow
Multicurrency accounts
bank credit lines and facilities still form the corner stone of most Credit quality of
Intercompany nettingcorporate funding
Pricing strategies, irrespective of size and standing.
credit provider
Bond markets and commercial paper hold a firm second place, Target credit rating
SWIFTbut are Funding
typicallycostavailable only to investment grade organisations.
0% 20% 40% 60% 80% 100%
Finance company internationalAlternative forms
Relationship with of funding including leasing, securitisation,
treasury centressupplycredit provider
chain finance and crowd funding have doubled since
Terms compared to Figure 8: Criteria for selecting funding
Payment factory2010, but have not (yet) outgrown the experimental stage.
requirements
Cross-currency pooling - Refinancing risk
notional pooling
Matching business
Cross-border pooling - plan cashflow
notional pooling Credit quality of
Cross-currency pooling - credit provider
zero balancing account
Target credit rating
None of the above
0% 20% 40% 60% 80% 100%
0% 20% 40% 60% 80% 100%
Treasury shown in a new light – PwC Global Treasury Survey 2014 t 11 uFunding: Beyond banks (continued)
Less than 62% of all respondents said they seriously consider What you need to think about
refinancing risk in their selection of funding sources. This may
be a sign of confidence in their own attractiveness to future • Talk to the credit ratings agencies to better understand
lenders, but may also be an indication of wishful thinking. Given your position and their modelling assumptions for your
the current focus on de-risking bank balances and in anticipation oganisation (when applicable)
of an era of higher interest levels, organisations with a lower • Discuss with banks the options available to you
credit rating may want to explore and exploit alternative funding • Explore alternative sources and methods of funding, such as
sources rather sooner than later. As the Chinese proverb says: supply chain funding, private placements and crowd funding
‘Hurry when you have time, so you’ll have time when you’re in • Focus on unlocking trapped cash from operations (working
a hurry’. capital management), working closely with tax and legal
• Don’t neglect operational issues triggered by alternative
funding. For example, supply chain finance and securitisation
will place additional requirements on your systems,
processing and data quality.
t 12 u Treasury shown in a new light – PwC Global Treasury Survey 2014Figure 14: Difference in
Figure
management
14: Difference
of financial
in management
and of financial and Figure 15: Integrating technology
Figure 15: Integrating
to enable straight
technology to enable straight
operational counterparty
operational
credit riskcounterparty credit risk through processing through processing
TMS with bank balance reporting
TMS with bank balance reporting
Not set and not managed Not set and not managed and settlement systems and settlement systems
Focus on reporting In entity In entity
TMS with market data sources
TMS with market data sources
TMS with general ledger TMS with general ledger
In country In country Electronic dealing Electronic dealing
system with TMS system with TMS
The increased focus on liquidity and risk by senior executives For the survey we asked participants about the overall flow
Regionally
and externalRegionally
stakeholders that began during the financial crisis ofTMS
treasury reporting TMS with electronic confirmation
with electronic confirmation
within
matching system
the business; both the extent of
matching system
has resulted in a far stronger demand for treasury reporting. reporting activityidentification
Risk and exposure by theRisk
business to treasury
and exposure (figure 9), and by
identification
Senior executives are asking more frequently for more detailed treasury systems
to the with electronic
board systems with electronic
(figure 10).
dealing systems dealing systems
Globally information aboutGlobally
a wider range of topics – and they want that
We found that overall, reporting
0% of ‘traditional’
20% 40% 0%treasury
60% 80% activities
20% 40%
100% 60% 80
information to be timely, up-to-date, relevant and reliable.
is stronger and more mature, while reporting
Automated on other
Partial topics,
Automated Partial
0%
Treasury20% 40% has
reporting 0%60%
become20%80%
a big40%100%issue
data 60% – more
80%complex
100%
such as operational risk and working
Manual capital performance,
N/A
Manual is N/A
and more demanding than
Non-financial counterparties ever before. In order
Non-financial counterparties to meet these significantly less well tended. Despite their relevance to treasury
(near) real-time
Financial reporting
counterparties demands,
Financial treasurers have to integrate
counterparties
business, these non-traditional reporting topics are included in
their TMS with the wider enterprise IT-landscape, external treasury reporting packages one way or another by less than 60%
banking partners and data providers. Arguably their biggest of the respondents.
challenge is to meet the demands for more reporting, without
Figure 10: Extent of reporting
Figure 10:
activity
compromising Extent
byquality.
on of
business
reportingto activity
treasuryby business to treasury Figure 11: Extent of reporting
Figure 11:
activity
Extentbyof
treasury
reporting
to the
activity
boardby treasury to the b
Cash management Cash management Funding and Funding and
(inc. cash forecasts) (inc. cash forecasts) refinancing risk refinancing risk
Risk management (FX, Risk management (FX, Risk management (FX, Risk management (FX,
interest, commodity) interest, commodity) interest, commodity) interest, commodity)
Operational working capital Operational working capital Counterparty/credit risk Counterparty/credit risk
Counterparty/credit risk Counterparty/credit risk Cash management Cash management
(inc. cash forecasts) (inc. cash forecasts)
Funding and Funding and
Operational working capital Operational working capital
refinancing risk refinancing risk
Treasury operational risk Treasury operational risk Market indicators Market indicators
Market indicators Market indicators Treasury operational risk Treasury operational risk
0% 20% 40% 0%60% 20%80% 40%
100% 60% 80% 100% 0% 20% 40% 0%60% 20%80% 40%
100% 60% 80%
Reported against KPI Reported
Reported against KPI Reported Reported against KPI Reported
Reported against KPI Reported
Only monitored Not
Onlymonitored
monitoredand Not monitored and Only monitored Not
Onlymonitored
monitoredand Not monitore
not reported not reported not reported not reported
Figure 9: Extent of reporting activity by business to treasury Figure 10: Extent of reporting activity by treasury to the board
Treasury shown in a new light – PwC Global Treasury Survey 2014 t 13 uFocus on reporting (continued)
KPIs: Bridging the gap between measuring and Counterparty risk management
benchmarking It appears that counterparty risk management is still to
be properly explored by many organisations (figure 11).
One of the more worrying findings from the survey is that less Respondents to our survey told us that financial counterparty risk
than 40% of all reports include benchmarking against a KPI is predominantly managed at a global level (82% of respondents
(figure 10). agreed, while 8% said they don’t manage counterparty risk at
Measuring and benchmarking are not the same – there’s little all). Operational counterparty risk is managed centrally by one
point in measuring performance if it’s not assessed against clearly in every three organisations and not managed at all by 23% of all
Figure 14: Difference in management of financial and
respondents.
defined and appropriate targets. SMART KPIs (measures that are operational counterparty credit risk
Specific, Measurable, Achievable, Relevant and Time-phased)
Not set and not managed
that are derived from and in sync with the organisation’s treasury
policy and control framework are extremely valuable tools,
providing early warning signals and keeping the organisation In entity
focussed on the treasury and risk issues that really matter.
Monitoring banks In country
The survey results also show that treasurers are still coming to
grips with the monitoring of banking cost and performance, Regionally
with most reviewing their banks’ performance on an ad hoc
basis. There is a growing awareness that the allocation of Globally
more lucrative fee business has to be traded against credit
commitment.
0% 20% 40% 60% 80% 100%
Increasingly, bank relationship management is being evaluated
from both sides of the table in a game of reciprocity – but as yet, Non-financial counterparties
Financial counterparties
there’s no sign of a common practice for the formal rating of
bank relationships. Figure 11: Difference in management of financial and operational
counterparty credit risk
Figure 10: Extent of reporting activity by business to treasury
Cash management
(inc. cash forecasts)
Risk management (FX,
interest, commodity)
Operational working capital
t 14 u Treasury shown in a new light – PwC Global Treasury Survey 2014
Counterparty/credit risk0 20 40 60 80 100
Bank fee monitoring
Managing intercompany transacctions and balances
Centralising available liquidity and managing net balance
Obtaining bank balance and transaction information
Cash forecasting
Focus on reporting (continued)
Figure 13: Frequency of counterparty exposure management
We’ve seen counterparty risk modelling evolve over recent years,
with organisations monitoring more than just their financial Daily 8%
1%
Monthly 7%
institutions rating – a majority now monitor credit default Quarterly
swaps. Surprisingly, only a few have extended their modelling to Yearly 39%
12%
include the monitoring of bank financial data, which is currently Ad hoc
Not reported
Figure 11: Mechanisms
considered to monitor counterparty credit risk
to be good practice. Figure 7: Sources of funding
33%
Limits against published
Bilateral bank facilities
credit ratings
Board/Risk Syndicated bank
Committee decisions facilities
Figure 13: Frequency of counterparty exposure management
Monitor CDS
Bonds
spread evolution
Monitor equity prices What you need to think about paper
Commercial
Monitor bond yields • Clarify who’s responsible forLeasing
what in treasury processes –
reporting flows from that decision
Not monitored Securitised finance
• Focus on the quality of reporting and establish a framework
0% 20% 40% 60% 80% 100% to monitor operational risk 0% 20% 40% 60% 80%
• Make full use of SMART KPIs
Figure 12: Mechanisms used to monitor counterparty credit risk
• Use measures that reflect the transaction – benchmarking is
Figure 6: International cash management techniques in use essential now banksFigure 8: Criteria
are pricing for selectingless
on transaction; funding sources
so when
relationships were important
Cashflow forecasting • Broaden your reporting frameworkPricing to provide focus to
operational risks arising from your treasury activities.
Centralised funding/ Funding cost
in house bank
Pooling within country - Relationship with
zero balancing account credit provider
Terms compared to
Cross-border pooling -
requirements
zero balancing account
Pooling within country - Refinancing risk
notional pooling
Matching business
plan cashflow
Multicurrency accounts
Credit quality of
Intercompany netting credit provider
Target credit rating
SWIFT
0% 20% 40% 60% 80%
Finance company international
treasury centres
Treasury shown in a new light – PwC Global Treasury Survey 2014 t 15 u
Payment factoryTreasury automation becomes the norm
Figure 14: Difference in management of financial and Figure 15: Integrating technology to enable straight
operational counterparty credit risk through processing
Effective treasury operation depends on comprehensive, accurate TMS with bank balance reporting
Not set and not managed and timely information – and that means excellent systems. and settlement systems
Technology and workflow has become the backbone of effective TMS with market data sources
In entity treasury management and treasury applications have become
indispensable to most treasurers. TMS with general ledger
About 80% of respondents said that they had integrated TMS
In country Electronic dealing
with other systems as a way of reducing operational risk and system with TMS
more than three-quarters had upgraded their existing TMS or TMS with electronic confirmation
Regionally implemented a new system recently. matching system
Risk and exposure identification
Automation promises straight through processing (STP) and systems with electronic
scalability of treasury processes. But integration and STP also dealing systems
Globally
place greater demands on IT security, validation, key controls 0% 20% 40% 60% 80% 100%
and monitoring,
0% 20% 40%as well 60%as tying
80%treasury
100% closer to IT support Automated Partial
infrastructures. In the case of centralised bank communication Manual N/A
Non-financial counterparties
hubs in support of shared services, transaction factories and in-
Financial counterparties Figure 14: Intergrating technology to enable straight through processing
house banks, service level agreements and application support
will be critical to success.
Advances in treasury technology have brought great benefits, What you need to think about
Figure 10: Extent of reporting
allowingactivity by business
treasurers to worktomore
treasury
efficiently and run reliable, Figure 11: Extent
• Treasury of reporting
can also benefit activity by treasury made
from investments to the in
board
IT across
scalable processes with limited staff; system-based workflow the organisation – are investment strategies aligned to exploit
Cash management is instrumental in putting in place segregation of duties and the maximumFunding and
advantage?
(inc. cash forecasts) refinancing risk
the ‘four-eyes principle at transaction level. But the reliance on • Can you make TMS part of your IT ecosystem?
Risk management (FX, Risk management (FX,
interest, commodity)
automation brings risks too – and treasurers say that the biggest • Have you
interest, got internal audit systems (data protection, key
commodity)
by far is the danger that their systems won’t keep up with the controls, change management)?
Operational working capital fast-changing regulatory environment. 70% of respondents Counterparty/credit risk
told us that new and changing external regulations were the Cash management
Counterparty/credit risk
biggest challenge to their systems and processes (figure 15). (inc. cash forecasts)
Funding and When it comes to systems, respondents worry about whether the
Operational working capital
refinancing risk
functionality they need will be available when they need it, and
Treasury operational risk the cost to upgrade. Market indicators
Market indicators Treasury operational risk
0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100%
Reported against KPI Reported Reported against KPI Reported
t 16 u Only monitored Not monitored and Treasury
shown in a new light – PwC
Only monitored
Global
Not Treasury Survey 2014
monitored and
not reported not reportedOrganisation revenue Number of countries in which respondents are operating
Less than £500m 0-5 11%
19%
Between £500m-£2bn 5-10
Greater than £2bn 10-20 33% 13%
Future regulations: The wild card
20-50
50+
15%
66% 14%
29%
Treasurers fear the impact of new regulations and the likelihood Most companies will have already dealt with the consequences
that they will require new and more stringent processes and more of the EMIR and Dodd Frank requirements, at least in terms
advanced systems, which could significantly increase operational of systems and processes. Basel III, although aimed primarily
cost. There’s also a concern that the more stringently regulated at banks will have inevitable second-tier consequences for
financial institutions will try to sustain their profitability by companies because of its impact on liquidity. This is likely to
Figure 16: the
increasing Howcost
will of
changes in the
financial banking
products regulatory
and services. Legal
raise the cost of funding, structure
which of respondents
will make the need to look for
environment impact treasury? alternative sources of funding all the more important. And
2%
Require new systems, processes Mifid2 will have a significant impact
Public on companies that trade
corporation
and procedures to manage Private corporation
commodities and will need careful planning.
Other 32%
Facility availability and pricing
The OECD’s BEPS guidelines, which are aimed at creating a level
playing field in fiscal terms and which Member States will need
Transaction pricing 66%
to incorporate individually, are also likely to have an impact
on treasury over the coming months and years. BEPS may not
SEPA
only have an impact on location of treasury centres, but more
Will provide a safer importantly on funding strategies and transfer pricing policies.
banking environment
Overall, there’s a strong message here for systems vendors. The
Require a change in how bank group ability of vendors to incorporate functions and features that
is selected and measured
support new compliance requirements has become an essential
Require a change in consideration when treasurers select products. We’re seeing many
current hedging stragies
treasurers question vendors closely about upcoming regulations;
Require additional facilities to meet
margining requirements
if they’re dissatisfied byNumber of legal
the answer, or entities
concerned that their
current vendor doesn’t have convincing plans in place to meet 4%
Don’t know new requirements on a timely0-10 basis – or increasingly, to anticipate
6%
10-20moving on.
their needs – they’ll consider
Change in legal structure
20-50 14%
50-100
Change in geographic areas What you need to think
about
100+
59%
that the business operates
• Look ahead at your likely future compliance needs 17%
0% 20% 40% 60% 80% 100%
• Start looking at your systems options early
Figure 15: How will changes in the banking regulatory environment impact • Talk to your treasury system vendor about your needs and
treasury their development program, as early as possible.
Treasury shown in a new light – PwC Global Treasury Survey 2014 t 17 uControl your destiny
It’s clear that the transformation of treasury isn’t over yet. in this day and age, treasury has to make use of integrated
Treasurers have proved their worth during the financial crisis and scalable technology that fits within the IT landscape of its
and the years of uncertainty following it, showing the many organisation.
opportunities to add value to their company. As a result,
The increased reliance on technology means that treasury
‘traditional’ treasury responsibilities have been embedded at all
professionals’ tool box must include not only technical financial
levels of the organisation.
knowledge but also a good understanding of IT issues and the
The effect, though, has been to divert treasury’s focus away control framework, as well as excellent soft skills to manage a
from the department itself. The hunger by senior executives for diverse set of internal and external stakeholders. Fostering these
more and more accurate and timely information forces treasury skills and developing strong relationships outside treasury and
to become a partner to the business and actively search for the finance will be key to success.
exposures and cashflow to manage. In order to be successful
t 18 u Treasury shown in a new light – PwC Global Treasury Survey 2014About PwC’s Treasury Benchmarking Tool
This powerful, web-based ‘treasury benchmarking tool’ captures combined with our broad client base, mean we are able to reach
our collective knowledge on how treasuries worldwide operate. wide and deep to compare you against companies of similar size,
It allows us to assess you against your (undisclosed) peers and complexity, industry and geography.
analyse where improvements can be made. Completion of the tool
We are confident that based on the benchmarking report we can
by 110 companies to date has produced the findings highlighted
help you driving the treasury agenda and creating value for your
in this report.
organisation.
We assess your performance over a number of areas where
We also assess your performance against the four typologies of
questions commonly arise:
our treasury maturity model: Transactional treasury; process
• Organisation overview
efficient treasury; value enhancing treasury; and strategic
• Market risk management
treasury (see diagram).
• People and systems Banking relationships
• Treasury characteristics The output from the tool offers powerful and comprehensive
• Cash and investment management insight into your treasury set-up, objectives and performance. It
• Risk and control Funding provides a graphic representation of how you measure against
• Top of the treasury agenda companies of similar size and complexity. The benchmark can
be tailored by geographic region, country, regulation, exchange
Through this tool, we can help you to understand what makes listing, size, industry, legal structure and
you different. Our people, smart approach and smart technology, market index.
Treasury shown in a new light – PwC Global Treasury Survey 2014 t 19 uMethodology
This survey is based on structured interviews with 110 benchmark information available in each of the nine sections.
respondents from companies across the world. The interviews Graphs displaying prioritised items are sorted based on an
were held between June and September 2014. exponentially weighted preference; e.g. preferences like high,
medium and low are given a weight of 9, 4 and 1 respectively.
The responses have been consolidated in the PwC Benchmarking
Tool.
Number Individual responses
of countries in whichare not separately
respondents available and when
are operating The following charts provided demographic information for
retrieved for reporting purposes are always consolidated on the 110 respondents:
an
anonymous
0-5
basis. This survey includes a subset only of all
19% 11%
5-10
10-20 33% 13%
Organisation revenue Organisation
20-50 revenue Number of countries inNumber of countriesare
which respondents in which respondents are operating
operating
Organisation revenue Number of countries in which respondents are operating
50+
15%
Less than $800m 14% 0-5
Less than £500m 19% 0-5 11% 11%
Between $800m-$3.2bn19% 5-10
Between £500m-£2bn 5-10
Greater than £2bn Greater than $3.2bn 29% 10-20 10-20
13% 33% 13%
33%
20-50 20-50
50+ 50+
15% 15%
66% 66% 14% 14%
29% 29%
ing regulatory Legal
Legal structure
structure of
of respondents
respondents
2%
Public corporation
Private corporation
Other 32%
Figurein16:
Figure 16: How will changes theHow will changes
banking in the banking regulatory
regulatory Legal structure of respondents
Legal structure of respondents
environment impact treasury?
environment impact treasury? 2% 2%
Require new systems, processes
Require new systems, processes 66% Public corporation Public corporation
and procedures to manage and procedures to manage Private corporation Private corporation
Other Other 32%
32%
Facility availability and pricingFacility availability and pricing
Transaction pricing Transaction pricing 66%
66%
SEPA SEPA
Will provide a safer Will provide a safer
banking environment banking environment
Number of legal entities
t 20 u Require a change in how bankRequire
group a change in how bank group Treasury shown in a new light – PwC Global Treasury Survey 2014
is selected and measured is selected and measured 4%More information If you want to know more about this Global Treasury Survey, please contact our Corporate Treasury specialists: Bas Rebel Nick Axton (Netherlands) (United Kingdom) +31 88 792 3824 +44 20 7 213 5170 Bas.Rebel@nl.pwc.com nick.axton@uk.pwc.com If you want to do more with your treasury to identify, realise or create value for your business as a whole, please contact your local PwC Treasury partner: Global and Switzerland Finland Netherlands Spain Sebastian di Paola Urmas Rania Wytse van der Molen Javier Hernando Guijarro +41 58 792 9603 +358 50 383 9425 | +31 88 792 5210 +34 915 684 144 Sebastian.di.paola@ch.pwc.com urmas.rania@fi.pwc.com wytse.van.der.molen@nl.pwc.com javier.hernando.guijarro@es.pwc.com Australia France Nordic region UK Ashley Rockman Mariano Marcos Anders Akner Yann Umbricht +61 (2) 8266 1882 + 33 1 56 57 88 85 +46 85 553 4259 +44 20 780 42476 ashley.b.rockman@au.pwc.com mariano.marcos@fr.pwc.com Anders.akner@se.pwc.com yann.umbricht@uk.pwc.com Belgium Germany Russia US and Americas Damien McMahon Thomas Schräder Konstantin Suplatov Peter Frank +32 2 710 9439 +49 211 981 2110 +7 495 967 6106 +1 646 4712787 Damien.mcmahon@be.pwc.com thomas.schraeder@de.pwc.com konstantin.suplatov@ru.pwc.com peter.frank@us.pwc.com Brazil Italy Singapore Paulo Mantovani Riccardo Bua Odetti Voon Hoe Chen +55 11 3674 3751 +39 (02) 66720536 +65 6236 7488 paulo.mantovani@br.pwc.com riccardo.bua.odetti@it.pwc.com voon.hoe.chen@sg.pwc.com China Japan South Africa Ian P Farrar Kenji Fukunaga Francois Prinsloo + 852 2289 2313 +81 (0)80 3727 1563 +27 (11) 797 4419 ian.p.farrar@hk.pwc.com kenji.fukunaga@jp.pwc.com francois.prinsloo@za.pwc.com Treasury shown in a new light – PwC Global Treasury Survey 2014 t 21 u
www.pwc.com/corporatetreasury
We are 500 professionals working in 150 countries who specialise in corporate treasury. Our specialists combine a variety of professional backgrounds including treasurers, bankers, system developers, accountants, integrators and management consultants
We’re proud to have received Treasury Management International’s (TMI) award for Best Global Treasury Consultant for the past 13 years. The TMI Awards for Innovation and Excellence have become the quality benchmark for the treasury profession worldwide.
© 2014 PwC. All rights reserved.
PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
t ut 24 u Treasury shown in a new light – PwC Global Treasury Survey 2014
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t 28 u PwC I Treasury shown in a new light – PwC Global Treasury Survey 2014
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